As Dropbox readies for one of the year’s biggest IPOs, it hopes to avoid joining the growing list of Silicon Valley darlings that can’t match their private valuations when they meet public market scrutiny. To buck the trend, it needs to either be growing faster or show it is more profitable than other software firms.

Right now, a variety of signs point to Dropbox being valued at 20% to 30% less than the $10 billion valuation it was awarded in private financings in 2014, based on revenue expectations. The company likely would need to demonstrate more robust growth, such as revenue gains of more than 30% a year, to justify that it is worth what it fetched a few years ago. Or it would have to show operating margins of around 10%, higher than average companies in the software sector.

Dropbox CEO Drew Houston during an event in San Francisco. Photo by Bloomberg

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A final word of caution: Once Dropbox prices its IPO, the valuation figures that get tossed around will be confusing. That’s because the number of fully diluted shares in 2014 isn’t the same as today, and also different from the number of outstanding shares that are used to calculate market capitalization. What matters is share price. If it is less than $19.10 per share, investors that have held Dropbox stock for four years are facing losses.

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